On March 11, 2021, the American Rescue Plan Act of 2021 (ARPA) was signed into law by President Biden. Regulations regarding the COBRA subsidy are forthcoming. In the meantime, we have briefly summarized what we know at this point. Please note that the following information is based on our understanding at this point and is subject to clarification and/or amendment based on the release of final regulations from the IRS and DOL.
ARPA includes a 100% COBRA subsidy for up to six months (April through September 2021) for individuals who lost health coverage due to an involuntary termination or reduction of hours on or after November 1, 2019. The individual must elect coverage and cannot have another offer of employer-sponsored coverage or access to Medicare.
ARPA also provides an extended election period for those who would be eligible to receive the subsidy but did not initially elect COBRA or who let their COBRA coverage lapse as long as they are still within their coverage period. This election would be prospective from April 1st without needing to elect and pay retroactively to the date that coverage was lost. Eligible individuals must enroll within 60 days of receipt of the new COBRA extension notice.
Employers are required to provide notice of the availability of the subsidy, the extended election period for COBRA coverage, and notice of the expiration of the subsidy. The DOL is to issue model notices by April 10, 2021.
Corporate Coverage TPA is working with our COBRA vendor to ensure we are ready to send the required notices to those eligible individuals. These notices will need to be sent within 60 days after April 1, 2021 (May 31, 2021). Upon receipt of the notice, eligible individuals will have a 60-day enrollment opportunity. CCTPA will coordinate with the employer to ensure the electing individual is eligible for the subsidy.
It is important to note that ARPA does not extend the COBRA’s coverage period, even if that period ends within the COBRA subsidy period.
The employer will offset the cost of the subsidy through a payroll tax credit against the Section 3111(b) Medicare Tax.
Please note that while we want you to be aware of the provisions in the law and have a chance to consider them, the law is quite voluminous and additional IRS guidance may be forthcoming. In addition, Corporate Coverage TPA cannot provide legal or tax advice regarding this law or its requirements. For those questions, you should consult your own counsel.